I wrote an article the other day about picking “best of breed” (BOB) stocks. No matter what kind of trader you are, you should always be on the look out for those great opportunities. My favorite being the stocks that have just been unnecessarily demolished.
As most of my recommendations come through technical analysis, when deciding on a BOB all technical analysis needs to go out the window. When stocks have been beaten, the price usually smashes through all levels of support. This makes them somewhat unreliable. Once the stock begins to correct itself, a true BOB stock will usually break right past all those same supports turned resistance.
AK Steel – AKS
I had ridden the success of AK Steel (AKS) during the first half of 2008 as the stock basically rose from $30 into the $50′s.
Many steel and commodity producers were banking on the weak U.S dollar. They were an attractive buy for foriegn companies. As the dollar begins to show some signs of life again, many investors are fleeing. While many stocks in this sector should be in the dumps, unfortunately AKS was forced to join the ride.
After the stock hit $73 back in June, the stock now sits at around $23. The company was fresh off reporting great numbers and forecast. Although AKS was dropped from one of their major holders, it is bound to happen as companies are looking to cut their losses or find new opportunities.
What makes this stock even that much better is the constant buyout rumors circulating around as of late. While the stock sits way below market level, there is a good chance that somebody might want to make an offer.
Buyout or not, AKS is poised to move back up to at least $50 range. By that level, you would have already doubled your investment. Although there is no time frame for a recovery, it is only matter of time. If you are bound to sit in cash or find something to stay long in, then you should really check out AK Steel.
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